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The eviction labyrinth

As long as a serious approach is not made to the problem of access to housing, the drama of mortgage defaults will weigh down expectations of economic recovery

In 1989, Gabriel García Márquez wrote a personal vision of the last days of Simón Bolívar, called The General in his Labyrinth — a reflection on power, solitude, and on how complicated it is to get out of certain mazes. The metaphor can be useful in understanding the present situation of mortgage foreclosures, commonly known as evictions.

About a year ago, the news media were giving a lot of coverage to the social movements surrounding the platform Stop Desahucios (Stop Evictions). The images of doorways full of possessions in cardboard boxes, piles of battered suitcases and whole families awaiting with rage the arrival of the bailiffs offered a bitter picture of the effects of the economic crisis. The strength of these movements, which denounced injustices, and proposed the alternative approach known as dation in payment — the loss of the house with cancellation of the whole of the debt — coincided with Spain getting a severe dressing down from the EU for its policy on mortgage loans. First in November of 2012, then in March of 2013, the EU Court of Justice considered that Spanish legislation failed to protect consumer rights in eviction cases.

Those mobilizations forced a legislative reform aimed at bringing national legislation into line with EU demands. It also proposed a socially aware approach to evictions. It accepted the obvious: that in the granting of many loans, and in other aspects of financial dealing, abuses had been committed that placed the consumer in a clearly unfair situation. A year later, the tension seems to have eased, the platforms are no longer in the headlines and some banks — but not all of them — have accepted alternative formulas to eviction. It cannot be said, however, that we are out of the labyrinth.

The announcement of the creation of a vast "reserve of public housing" has produced no concrete results

The announcement of the creation of a vast "reserve of public housing" has produced no concrete results; the courts are still inundated with lawsuits in which people complain of abuses in their contracts; there is no automatic norm allowing debtors to renegotiate their debt to reduce it; and many of them are still condemned to keep up payments on debts they will never fully honor. What has happened in these months? The legal reforms in May and September introduce adjustments which may amount only to provisional remedies, devoid of any real effects. We still have no legislation similar to that of countries like France, Germany and the United Kingdom, to protect the over-indebted consumer.

While these reforms are receiving publicity, many banks have transferred their risks, the loans pending collection, to the so-called bad bank, and the price of transference has on many occasions been less than half the debt — in other words, the banks have agreed to recover less than 50 percent of what was owed to them, and have restructured their balance sheets accordingly.

On other occasions, banks have preferred to sell the loans to foreign investment funds for less than 20 percent of the value of the debt, which means that in the future families will find that they are no longer being billed by the bank, but by one of these funds. It is surprising that a bank should be prepared to sell off a mortgage that it considers dubious for a mere song, and is not disposed to accept dation in payment, or a 15-to-20 percent reduction in the debt. As if providing mortgage loans had ceased to be a profitable business.

As long as structural measures are not adopted, to allow hundreds of thousands of people a second chance; as long as a serious, long-term approach is not made to the problem of access to housing, the labyrinth of mortgages and the drama of evictions will weigh down people's expectations of any economic recovery. As we turn another corner and another, we may find that, far from emerging from the labyrinth, we are even more lost in it.

José María Fernández Seijó is a judge in Barcelona.

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